LOOKING BACK AT 2017 – A YEAR OF CHANGE

It’s fair to say 2017 was a year of phenomenal change within the energy sector, with some huge changes in generation, demand and infrastructure. The transition to a cleaner energy future is well underway, with key positive trends solidifying, and gathering pace. Most dramatically, we are seeing the death of coal as an energy source in the UK. Renewables generated more than three times the amount of electricity as coal over the past year; wind output exceeded that of coal on 263 days, and solar on 180 days.

Electricity use in the UK continues to fall, as improved energy efficiency in homes and businesses reduces the demand for energy. Critical here, is the switch to LED lighting, offering approximately 50% reduction in energy use in lighting – the largest subsector of electricity use in buildings. Improvements in lighting efficiency also dramatically reduce the evening peak, meaning less power stations are required to ensure reliability of supply.

ELECTRIC VEHICLES SALES TO KEEP GROWING IN 2018.

Of all the predictions we are making for 2018, this one is a no brainer! By the end of 2017, there were 125,000 plug-in electric vehicles on UK roads, up from 90,000 at the end of 2016. At these kind of exponential growth rates we can expect to see over 200,000 electric vehicles on UK roads by the end of 2018.

This exponential growth of EV sales is partially driven by improvements in EV technology, but perhaps more importantly by increased social acceptance. Concerns about local air quality and climate change, are making electric vehicles an increasingly attractive option. With and the lifecycle costs of EVs already being cheaper than petrol or diesel, it is also being seen as the economically rational approach as well. An increase in EV ownership leads to a more widespread infrastructure, with charge points proliferating in the home, at work, and provided by councils in city centres. All this normalises EV ownership, and alleviates concerns about range anxiety. Put all this together and we can expect to see a snowballing of EV sales over the coming years.

THE BATTLE FOR EV CHARGING INFRASTRUCTURE TO HOT UP

One of the most fascinating aspects of the transition to EVs is that there is a multi-billion pound fight to be the key operators in this new marketplace – and all this is taking place in a way that it is virtually invisible to the end customer.

Put simply, if EVs are to replace fossil fuelled transport, the market for petrol and diesel will be replaced by one for electricity. At present, access and charging for public EV charge points is controlled by a series of RFID cards, much like an Oyster card. Whoever controls the EV charging infrastructure will be replacing the petrol industry, and that is a huge prize up for grabs. Behind the scenes we’re seeing a 4-way fight to end up owning the new EV charge point market – traditional suppliers of petrol such as Shell and BP; electricity utility companies; big data companies; and the EV charge point manufacturers themselves. Could there also be publicly owned, municipal, or community-based solutions here as well?

SOLAR PV MARKET TO RECOVER IN 2018

The PV market has been relatively quiet since the FiT cuts of January 2016, but we are beginning to see the signs of a recovery. We are seeing increased levels of enquiries for PV from residential and commercial customers alike. Local council tenders, are proliferating again.

This is following the classic profile of market confidence after Government FiT cuts. After FiT reductions we see low levels of enquiries as the media message is typically that ‘solar doesn’t work after the FiT cuts’. This isn’t true – the returns on solar PV are still strong, especially for commercial applications. After all, the FiT is only a minor contributor to the economics of a PV system, and the majority of benefits come from not purchasing expensive electricity from your supplier anymore. After a year or so, the public become aware of the continued good economic case and the market recovers. This is the classic ‘solarcoaster’, and we’ve ridden the ups and downs eight times now (8!) since we were founded in 2006. This year is looking like an ‘up’ for solar PV.

SYNERGIES BETWEEN EVS AND SOLAR PV

Part of the recovery in the PV market has been driven by synergies between EVs and solar PV. Many new PV customers are also new owners of an electric vehicle. Whilst they may not have considered PV before, the idea of running their car off their own electricity is instantly and automatically appealing.

The Zappi charger, which diverts (free!) excess solar PV generation directly into an electric vehicle, is a key enabling technology here. Demand for the Zappi has outstripped their expectations since its launch a few months ago, and we’re expecting widespread adoption of this device through 2018.

We are also increasingly seeing customers wanting the full set of solar PV, battery storage and EV chargepoint, and this is a trend we expect to intensify throughout 2018.

BATTERY STORAGE TO CONTINUE TO REDUCE IN PRICE

Much as we saw a dramatic fall in the costs of solar PV as it began to be mass produced, so we are also seeing the costs of battery storage technologies reduce, as they are similarly manufactured at scale (largely driven by the EV market). Over the past 6 years, the cost of Li-ion batteries has fallen by 20% each year, and we expect this ‘learning curve’ to continue.

All this should mean lower prices for installed battery storage systems across the board, but whether this is passed to consumers will depend on having a competitive market for home batteries. At present Tesla offer the cheapest unit price (per kWh of battery capacity), and further cost reductions are likely to depend on whether Tesla’s competitors are able to challenge their price point.

SUMMARY

In conclusion there is much to be excited about in the distributed energy sector in the coming year. EVs and battery storage are both taking off exponentially, with a host of new products and functionalities becoming available in 2018. We are expecting a strong year for the solar PV market, as the rooftop sector picks up again, and subsidy free solar farms get developed as PV prices continue to fall. The energy transition is looking unstoppable.

Author: Joju Solar